More US banks to settle foreclosure claims

Goldman Sachs Group, Morgan Stanley and two other banks may agree as soon as this week to settle claims over botched foreclosures in an accord similar to one reached with 10 loan servicers on Monday.

The agreement, also involving HSBC and Ally Financial, would end case-by-case reviews of foreclosures under earlier accords with the biggest mortgage servicers. The Federal Reserve-led discussions specified at least $US1.5 billion in cash and assistance for borrowers.

Ten servicers agreed on Monday to an $US8.5 billion settlement with the Fed and the Office of the Comptroller of the Currency. It ends the outside reviews in exchange for a deal that limits their costs to $US3.3 billion in cash for foreclosures in 2009 and 2010 and $US5.2 billion in other mortgage-related aid.

The settlement could bring the industry payout to $US10 billion and expands beyond the 14 firms required to review foreclosures under the April 2011 agreement. IndyMac Bancorp’s successor, OneWest Bank FSB, and EverBank Financial Corp have yet to reach settlements with regulators.

“We continue to have conversations with the servicers we regulate who were under April 2011 enforcement actions but were not part of the settlement," said OCC spokesman Bryan Hubbard. OneWest, EverBank and HSBC were included, he said.

Related Quotes

Company Profile

Goldman Sachs bought Litton Loan Servicing in 2007 and Morgan Stanley bought Saxon Capital in 2006, before a housing market collapse that led to the worst financial crisis since the Great Depression. Litton initiated 135,586 foreclosure actions in 2009 and 2010, and Saxon initiated at least 60,313 actions in the same period, the Fed said.

Morgan Stanley and Goldman Sachs were separately ordered by the Fed to hire outside consultants to conduct foreclosure reviews. Their case-by-case reviews parallelled those ordered in the April 2011 settlement.

HSBC “remains in discussions" with regulators, said spokesman Neil Brazil.

Residential Capital, the unit of Ally involved in the settlement, supported that bank funds “should go to consumers rather than consultants", and had been delayed consideration of the settlement because of its ongoing bankruptcy, said Ally spokeswoman Susan Fitzpatrick.

“The ResCap board of directors will consider the settlement proposal promptly" and talk with a panel representing unsecured creditors, she said in a statement.